An ageing crooner some see as Germany's answer to Tom Jones but others accuse of stoking far-right sympathies, has staged the biggest comeback in the history of the country's pop music.

Heino, instantly recognisable by his blond hair and trademark sunglasses worn to hide bulging eyes caused by a thyroid condition, is best known as the baritone singer of Schlager – schmaltzy German folk songs that propelled him to fame in the 1960s and 70s.

Having laid low for years, at the age of 74 he is suddenly back, breaking sales records and securing his place in German cultural history with a new album.

Backed by an intensive PR campaign and a new wardrobe of skinny jeans and studded leather jacket, Mit freundlichen Grüßen (All the Very Best) has taken him into new realms. The album contains cover versions of punk, hip-hop and hard-rock hits – to the disgust of many of the bands who originally performed them. Since its release this month it has been legally downloaded more than any other German album and has sold tens of thousands of copies.

The musician has been touring Germany in a Heinomobile, a Mercedes S-class limousine embellished with his blond-haired skull logo. He has been invited to perform at Wacken Open Air, the world's largest heavy metal festival, but in order to keep old fans on board, insists he will continue singing the ever-popular Schlager.

But despite attempts by Heino, his PR machine and his wife Hannelore – a former Miss Austria – to promote the image of a loveable rogue who sings sentimental hits about mountains and maidens, a darker side has been emerging.

Asked about his health in a recent interview, Heino – real name Heinz Georg Kramm – responded that he was "still as hard as steel, as tough as leather and as nimble as a greyhound". The words are unmistakably taken from a speech given by Adolf Hitler to 50,000 members of the Hitler youth movement in 1935, which all Germans learn about in history lessons.

Heino's manager, Jan Mewes, said he made the remark without knowing of its "historical context". But Heino observers say it is just the latest expression of what they allege are his far-right sympathies.

In the 1970s he insisted on singing all three verses of the German national anthem in a version recorded for school pupils, despite the fact that the second, nationalistic verse has long been considered taboo. Then in 1989 he stormed the charts with Schwarzbraun ist die Haselnuss (black-brown is the hazelnut), a folk song made popular in the 20th century by the Hitler youth and Wehrmacht soldiers. During the days of apartheid he performed for white farmers in South Africa, a decision he insists he still does not regret.

The rolled Teutonic R he typically uses when he sings and his platinum blond hair have helped stoke his popularity among conservatives, including people on the far right.

Several of the bands whose songs Heino has covered on his new album have voiced their objections, arguing he is using some of them to glorify racism. While they can do little about it so long as he has stayed within the copyright rules, Dero, the lead singer of the band Oomph! whose No 1 song Open your Eyes is on the album, said: "We are going to take a closer look at Heino's version of our song to ensure he's stayed within the framework of the rules. He has a few songs in his repertoire which seem to glamorise racist ideas."

Axel Schulz, manager of the band Die Ärzte, whose song Junge (Boy) is on the album, said: "Unfortunately as long as this idiot doesn't blatantly change the song, then I can't do anything about it."

But Heino has suggested the bands are just jealous of his success, while ignoring the fact they will gain from the royalties. "They're making a pretty penny from my album, they should just keep their mouths shut," he told the Frankfurter Allgemeine newspaper. "And if they feel sullied by the money there are plenty of hospitals, children's homes … they could donate it to."

He said many Germans – such as music critic Rainer Moritz, who referred to him as the "vomiting agent of several generations" – had been too snobbish to recognise his success as a cultural figurehead, but that the proof of his talent was in his sales figures, as well as the fact he has a recognisability factor of 99%, even higher than that of the chancellor, Angela Merkel.

"Why should an old oak be bothered by the pig that claws it?" he asked, pointing out – as he likes to – that in 1980 his album Lieder der Berge (Songs of the Mountains) sold 1.2m copies in Germany while John Lennon, who was assassinated in December that year, sold just 200,000.

"For years I've been the butt of jokes, but to date I've sold 50m records. If anyone from the music scene laughs at me now, all I can do is laugh back," he said. "The day before yesterday four young people passed me on the autobahn, gave me the thumbs up and waved. These are things that make a 74-year-old happy. After all, they could be saying: 'what's that old geezer up to?'" he said.